10

In Search of New Prophets:
From Keynesianism to Liberalism

The Questioning of the Social-Democratic Compromise

The Keynesian Equation Jammed

In becoming the flagship of the socialist and social-democratic parties, Keynesian policies made possible what was, for them, the electorally ideal conjuncture of three otherwise contradictory interests: the sectional interests of the working class, the interest of capital in unfettered growth, and the interest of the ‘national community’ in general well-being.

With the slow-down in growth, however, the intellectual and technical framework of Keynesianism proved of limited effectiveness in the conduct of macroeconomic policy. Reflationary policies through strengthening internal demand or supporting investment – traditional Keynesian measures to sustain growth, and hence employment – were sooner or later punished, given external constraints, by capital flight and an inflation/devaluation spiral. The failure of the various attempts at reflation ‘in one country’, particularly in France (1981–82) and Greece (1981–84), are sufficient testimony. In the 1970s and 1980s, the great economic and social synthesis of the social democrats, thanks to which they had asserted themselves as a victorious and resolutely ‘modern’ political force, seemed to be exhausted. The ‘parties of reform’, previously hegemonic, found themselves without guidebook or compass. ‘It is as if we were walking on quicksand,’ observed Kent Carlsson, then leader of the Swedish Young Socialists: ‘We did not know how to get out of it. We questioned what we had always defended and were not in a position to formulate new solutions.’¹

With the explosion of the crisis, economic expansion seemed subject to the supply-side imperative of realizing high profits, and thus to a redistribution of wealth in favour of capital.² The social cost of the policies of competitive deflation, implemented by states under the constraint of international competition, was very high (unemployment, job insecurity, and deterioration of the welfare state and public services). The Keynesian equation appeared to be jammed. And as in the 1930s, social democrats found themselves boxed in by the economic ‘crisis’ engulfing the Western world.

The Tripartite Social Pact Fissured

In addition, a complex set of factors tested arrangements of the ‘corporatist’ variety.³ A certain decentralization of bargaining institutions and, very often, an oscillation between centralization and decentralization, was a sign of the new situation in the majority of countries with a strong social democracy.

In Sweden, country of neo-corporatism par excellence, the system of national co-ordination became ‘increasingly weak after 1983’.⁴ The mistrust of an influential section of employers towards centralized wage bargaining, evident since the 1970s, finally prevailed, despite the resistance of the social-democratic government and some sectors of the trade unions and employers.⁵ Moreover, the less compact structure of the trade-union movement favoured this development. ‘Independent’ unions (unconnected to the SAP) of white-collar workers in the public and private sectors had formed bargaining ‘cartels’ in the 1970s. Initially, ‘these cartels rode on the coat-tails of the LO-SAF accords, but in the 1980s separate and distinctive agreements became more common’.⁶ In the 1980s and 1990s, industrial conflicts, as well as conflicts between blue- and white-collar workers and private- and public-sector employees, became more frequent, as did government intervention to ‘mediate’.⁷ Here too, as in Denmark, a significant reduction in the cohesion of the trade-union movement, indicated by the decline in inter-confederal concentration (increase in the number of ‘peak-level union confederations’), clearly worked in favour of a certain decentralization of the system.⁸ In sum: ‘despite considerable oscillation between centralized and decentralized forms of bargaining since 1983, the data support the view that 1980 marked a significant shift away from centralized bargaining’.⁹ Considerably more so than in other countries, the Swedish class compromise developed in the 1930s was first and foremost a great national accord, progressively assuming the form of ‘macro-bargaining’ between social partners. It was precisely this accord and quid pro quo – not a system of industrial relations – which came under challenge from the 1980s onwards.

In Denmark, a system of ‘centralized decentralization’ was on the way to being established,¹⁰ particularly from 1981, year of the ‘first truly decentralized round since the early 1930s’.¹¹ Industrial conflicts became more frequent, and their resolution involved government intervention, notably by legislative means, whoever held the reins of power. These frequent interventions impaired the celebrated ‘Danish model’, which involved social partners resolving their own problems.¹² In the 1990s, according to Wallerstein et al., Denmark was ‘moving toward a new system in which the main actors are neither the national unions and industry-level employers’ associations nor the peak associations, but five bargaining cartels – for industry, construction, transport and services, municipal employees, and state employees – and their counterparts on the employers’ side’.¹³ Establishment of these multi-industry or multi-professional cartels, covering the totality of blue-collar and a majority of white-collar workers, had two combined effects. On the one hand, it intensified the fragmentation of the system; on the other, it restricted the scope of the trend to decentralization. Henceforth a combination of moderate centralization and moderate fragmentation appeared to mark the Danish industrial relations system.¹⁴

Signs of decentralization were equally evident in the Netherlands. Here, the consociational process of decision-making was in some respects close to neo-corporatism. It was based on vertically organized, rigid confessional and sociopolitical subcultures (Calvinist, Catholic, socialist, liberal). With ‘depillarization’ there set in an erosion of the ‘highly centralized incomes-policy-based system’ – the great change taking place in 1968 – in favour of a more decentralized structure, marked by a preponderance of branch bargaining.¹⁵ More recently, the so-called ‘Dutch miracle’ of the 1990s owes much to the co-operative attitude and wage moderation of the unions. For many observers, the ‘Dutch model’ has become the symbol of a third way between Anglo-American deregulation of labour markets and the more ‘rigid’ systems of countries like Sweden or France. This model, which has contributed to a spectacular fall in the rate of unemployment without an American-style aggravation of wage inequalities and poverty, allies fiscal conservatism, wage moderation, maintenance of universal social security but with reduced benefits, and an active labour-market policy favouring part-time employment.¹⁶ One of the most perverse effects of this policy – one among others – was a marked deterioration in the Dutch welfare state, impaired by a long dose of austerity.¹⁷

Throughout this period, centralized tripartite bargaining has not ceased to play a co-ordinating role, ‘but it does not have the same compulsory character as in the 1960s and the solidaristic profile of wage policies has weakened’.¹⁸ In sum, while it remains active, the institutional form of bargaining has evolved in Holland. The balance ‘has shifted from a tripartite pattern of centralized collective bargaining, towards bipartite organized decentralization under the shadow of (state) hierarchy’.¹⁹

Historically, British trade unions are among the most ‘conflict-oriented’, despite their close association with Labour, a party that was in government on a regular basis until the end of the 1970s. The superficial unity and decentralized structure of British trade-unionism, as well as the symmetrical inability of British employers’ associations ‘to enforce collective agreements on employers’,²⁰ largely account for the historically undeveloped and very unstable character of ‘corporatist’ arrangements in the United Kingdom. The chronic ills of the British economy and the tendency of Labour governments, despite electoral promises, to adopt policies of deflation and monetary rigour, have undermined all attempts at lasting national cooperation with the unions. Doubly prey to the indiscipline of their base and the programmatic renunciations of the party, union leaderships have (e.g. in 1969 and 1978) abandoned midway their policy of ‘voluntary wage restraint in return for social welfare and labor law reforms’.²¹ Thus, Labour was the victim rather than the beneficiary of industrial mobilization, and ‘has twice been ejected from office in the midst of strike waves (1970, 1979)’.²² The great anti-union offensive launched by the Conservatives after their return to government in 1979 led to a profound political and institutional weakening of the union pole, without equivalent in Europe. The erosion of union power, as well as the new-found self-confidence of employers, have favoured the ‘disorganized decentralization’ of the industrial relations system. In truth, it is more accurate to speak of an ‘institutional collapse’ in the UK, ‘as employers have simply chosen to opt out of branch-level arrangements’.²³

In power once again since 1997, Labour seemed to follow in the footsteps of the Conservatives, despite a more skilful and amicable management of relations with the unions. Certainly, ‘the style and appearance of governance is noticeably more consultative and consensual than previously’, particularly over social security and welfare policies, and differs from the overtly hostile attitude of the Conservatives.²⁴ However, especially in the first phase of the Blair government, the unions were largely excluded from any significant political consultation on economic policy – something that strongly distinguished Blair from his continental socialist counterparts.²⁵ Today, the bellicose rhetoric current in the trade-union world during the Thatcher years is being transformed into a more constructive and open attitude towards employers. The era of systematic confrontation is possibly over. But given the structure of the TUC and CBI, given the unions’ power deficit, and given a long tradition of failure and a traumatic ‘institutional memory’, the advent of a ‘new industrial partnership’, centralized and enduring, seems to be no easy matter in the UK

In postwar Germany, the ‘dual system’ of industrial relations (‘Works Councils in the factory and highly centralised and professionalised unions at the national and regional level’) played a major role in the preservation of social peace. Bargaining at regional and sectoral levels, generally focused on wage issues, was complemented at the base by enterprise agreements, and thus by a sort of ‘unofficial second round of negotiations’ conducted by the works councils. Meanwhile, the leadership of IG Metall and the employers’ federation provided an informal mechanism of national coordination. In effect, the German system gravitated around collective bargaining at the level of industrial sectors and co-decision at the level of enterprises.²⁶ In this respect, it was less centralized than the Scandinavian systems, and policies of wage solidarity were significantly less advanced than in Scandinavia. It was on the basis of this structure that a tripartism of ‘concerted action’ was developed in the period 1967 to 1976, a rather weak centralized form involving the peak associations at national level.

This system facilitated solutions that were more flexible and better adapted to the situation of the individual firm.²⁷ The flexible and more ‘employer-driven’ character of German neo-corporatist structures (better attuned than elsewhere to the needs of individual firms) was conducive to a better adaptation to the 1980s and 1990s. Certainly, greater decentralization marked the system of industrial relations from 1976 onwards. The diversification of interests, the rise of alternative social movements, and the flourishing of so-called ‘qualitative’ demands also led in this direction. Decentralization was complemented by a strengthening of works councils, which assumed ‘an increasing role in the implementation of industry-level agreements on wages and technological change’.²⁸ In the long term, this is a development that could encourage trends to greater deregulation, since the number of large firms (where unions are robust) is declining, and the number of small enterprises (which often have no works councils) is increasing markedly.²⁹ More generally, the importance of the central scale diminished with the end of ‘concerted action’, something that was further encouraged by German reunification. Thus, the system rediscovered its ‘natural’ structure: bargaining at branch level, although weakened, remains dominant.³⁰ But despite these developments, the system has displayed remarkable robustness overall. In addition, the Schröder government seems to be encouraging the social partners to conclude macro-level agreements (e.g. the Alliance for Jobs). The new economic environment, both national and international, and the unification of Germany have ‘both challenged certain particulars and reaffirmed the basic strengths of the German model’.³¹

By contrast, neo-corporatist arrangements have more or less persisted in Norway and Austria. In the first half of the 1980s in Norway, we observe the same tendency towards decentralization, but marked by high and low points and considerable instability. In the second half of the 1980s, on the other hand, the system was recentralized in such a way that by the end of the decade, national collective negotiations were among the most centralized in Norwegian history. The persistence of centralized procedures seems to be connected with the rapid development of the oil industry and the need to restrict ‘the country’s high and increasing wage drift, which accounts for two-thirds of all wage increases’.³² According to Torben Iversen’s analysis, after 1986 ‘cost sensitive employers and workers in the exposed sectors allied themselves with an “activist” government to control the militancy of privileged “maverick” unions and restore the competitiveness to Norwegian industry’.³³ Thus, a coalition formed by a large proportion of employers and the LO union confederation, under the strong impetus of the Labour government, encouraged centralization of a system that nevertheless experienced strong pressure towards decentralized collective bargaining. In fact: ‘bargaining returned to the sectoral level in the 1997 bargaining round for the first time in more than a decade’.³⁴

As in Germany, the Austrian system of interest mediation is structured around a small number of very centralized organizations and works councils. The latter are, however, more integrated into the national union than the German works councils. In Austria, the process of wage-bargaining is traditionally conducted at industry level, despite the fact that the ÖGB, the trade-union confederation, is very centralized, its ‘statutory authority’ over its affiliated organizations being the strongest in Europe.³⁵ In this system of decentralized centralization, the ‘centralized leadership acts more like a referee in a multilayer game than a player bargaining the outcome directly with employers’.³⁶ Thus, particularly in large competitive firms with powerful workers’ collectives, the national agreement on wages is followed by wage-bargaining at factory level, which often challenges policies of wage solidarity and favours wage drift.³⁷ This system, which is certainly less conducive than the Swedish, Danish and Norwegian systems to reducing wage inequalities, has facilitated flexibility and adaptability in incomes policy. Thus, notwithstanding the corporatist structure, ‘nominal and real wage flexibility in Austria is one of the highest among OECD countries’.³⁸ Austrian neo-corporatism combines national co-ordination (and the introduction of macroeconomic criteria into incomes policy), industry-wide bargaining, and greater variation in wages at the level of the firm. This flexibility has allowed it to absorb external pressures arising from internationalization and technological change better, without generating global opposition to centralized collective bargaining, as in Sweden and Denmark.³⁹ At the same time, the profoundly consensual culture of Austrian elites, product of the experience of devastating conflicts in the past, has favoured the maintenance of national structures of co-ordination. In addition, the persistence, as in Germany, of strong inter-confederal union concentration, and the increase in intra-confederal concentration,⁴⁰ tend in the same direction. Nevertheless, however, the vitality of the institutions of national co-ordination is in decline, ‘while the power of individual bargaining units and of work councils rose’.⁴¹

The Trend towards Decentralization

Thus, everything indicates a descending curve of centralized bargaining. Systems of national collective bargaining, bi- or tripartite, experienced their moment of glory in the 1960s and endured, despite tensions, for the next decade. They have since fissured.⁴²

The reasons, which differ with the circumstances from country to country, have been extensively studied. They include:

(a)The strong rise of ‘white-collar’ unions (particularly in the public sector), and the contraction and growing fragmentation of the traditional working class, have led to a reduced role for trade-unionism as a national, cohesive and representative institution. The decline in inter-confederal concentration – very evident in the Nordic countries, but also in France and Italy⁴³ – has played an important role in the crisis of centralized bargaining in the Scandinavian countries, the classical instances of corporatism.

(b)Strengthening in the labour-market position of the highly skilled and educated segment of the labour force – the ‘winners’ from technological change – has favoured the development of phenomena of ‘micro-corporatism’ and the establishment of more flexible systems of remuneration.⁴⁴ This challenges solidaristic wages policies, which can only be managed centrally.

(c)The changed priorities of employers, who demand greater flexibility in the labour market (typically, wage cuts) in a context of intensified international competition, lead to a crisis of centralized tripartism. For some, employers are the major protagonist of the trend to decentralization.⁴⁵ The expansion in diversified quality production tends in the same direction. Micro-bargaining in the framework of the firm – a framework that is now generally (but not invariably) advantageous to employers – encourages ‘differentiated, rather than uniform, responses’.⁴⁶ This change is an important factor – for some, even the crucial causal factor – in greater decentralization. To put it simply: ‘many employers no longer view centralized bargaining as a good instrument for the control of wage costs’.⁴⁷

(d)European integration diminishes the importance of ‘national fora’. Various aspects of economic and social policy become subject to regulation within the Union and are largely directed by it.

(e)The state’s increasing inability, during the crisis, to act as ‘guarantor’ of the benefits legitimately anticipated by the social partners in return for their conciliatory attitude constitutes an additional obstacle to corporatist integration.

(f)The end, in some countries, of prolonged social-democratic domination, and the advent of an era of frequent alternation (Scandinavia), or protracted confinement of socialists to opposition (Germany, United Kingdom), were not conducive to systems of centralized collective bargaining.

Thus, overall, everything points to the lesser stability and effectiveness of established corporatist systems, and a displacement of the centre of gravity of industrial relations systems to the sectoral level and the micro-level of firms.⁴⁸ But the trend towards greater decentralization is not uniform, and the thesis of an ‘iron law’ of decentralization is unsustainable. National situations are very diverse; toing-and-froing between different levels of bargaining is now more frequent, as is government intervention.

However, if, among the countries examined here, we identify those that have displayed the greatest centralization in the postwar period (Sweden, Denmark, Netherlands, Norway), only Norway partially retains a centralized structure of wage-bargaining, albeit in markedly more unstable form. The trend towards decentralization predominates, accompanied by greater instability. If we take as our comparative reference point the period of ‘concerted action’ (1967–77), from one angle Germany, a composite case with a considerably less centralized format, also figures among the countries en route to decentralization. On the other hand, in Austria, a classic case of corporatism, the somewhat less centralized system of wage-bargaining, which combines bargaining by industry with the participation of peak associations, still remains more or less operative.⁴⁹ Overall – to adopt Torben Iversen’s terminology – the new balance of bargaining systems currently weighs more towards the German side (‘monetarist semi-decentralization’) than the Scandinavian (‘Keynesian centralization)’.⁵⁰

A Few Words in Conclusion

Neo-corporatist regulation is not enjoying its best years. The trend towards greater decentralization is incontestable. However, it is not general and, rather, takes the form of ‘organized decentralization’ (Great Britain being a case of ‘disorganized decentralization’).⁵¹ We should nevertheless emphasize that crisis and instability do not issue in the triumph of ‘pluralism’, or a sort of chaos in industrial relations. After all, with the possible exception of Great Britain (and, in a quite different context, the United States), the weakening of union federations, one of the two poles in the capital-labour pact, does not appear to be either profound or irreversible.⁵² Thus, the various forms of ‘social partnership’ have not disintegrated. The crisis or reduced stability of the central level leads predominantly to the assertion, activation and enhancement of ‘varieties of meso-level corporatism’.⁵³ Collective bargaining systems thus become ‘more sector-centered’.⁵⁴

Moreover, in the 1990s signs emerged of a certain revitalization of social pacts, following the enormous difficulties of the 1980s. The agreements contained in this new generation of social pacts are representative of the unions’ defensive attitude, since they often lead on to a kind of negotiated deregulation – what Negrelli termed ‘deregulation by consent’.⁵⁵ At all events, compared with the ‘Anglo-American’ model or southern Europe, the countries traditionally considered exemplars of ‘corporatist systems’ (Sweden, Norway, Denmark, Austria, the Netherlands, Belgium, Germany) still retain wage-bargaining structures that are a good deal more centralized than elsewhere.⁵⁶ Their centralized and semi-centralized bargaining systems, which make them ‘co-ordinated market economies’, remain qualitatively different from the fragmented bargaining systems characteristic of the ‘liberal market economies’.

Systems of consultation thus remain institutionally dominant, but the general tendency towards a more decentralized balance is certainly not ‘distributively neutral’. Centralization tends to favour the weakest in the labour market, and wage solidarity is administered at the central level. In particular, the severe testing of Scandinavian centralism – ‘Keynesian centralization’, Iversen has written, ‘became both a barrier to competitiveness (by inhibiting flexibility) and a vehicle for wage redistribution rather than wage restraint’⁵⁷ – is politically significant. Fundamentally, the relative destabilization and ‘flexibilization’ of corporatist arrangements challenges – at least in part – one of the boasts of postwar social democracy: an alternative structure of regulation which, while not revolutionary, or the most effective form of regulation in the world, could always serve as a corrective to market regulation.

What is to be Done? Social-Democratic Responses

Since Keynesianism allowed the social-democratic parties to reconcile the imperatives of greater equality and efficiency in a kind of virtuous circle, and thereby perform the dual function (very rewarding electorally) of being simultaneously working-class parties and parties of all the people, it was abandoned only some time after the onset of the crisis.

Attached to Keynesian regulation and protection of the gains of a whole political and economic career – and epoch – social democracy, a reformist force par excellence, began to convey the impression of a ‘conservative’ formation. Like those ‘prophets of the past’ who were unwilling to adapt to the evolution of circumstances and ideas, it emphasized the defensive aspects of its economic and social approach. Thus, initially (the 1970s), it more or less clung on to the Keynesian programme, trying to implement it even in adverse circumstances. And in a second phase (the 1980s), influenced by the restrictive international environment and the domination of neoliberal ideas, it was prompted to take measures of a neoliberal sort (prioritization of the fight against inflation, austerity policies, increase in the income of capital owners at the expense of workers’ income, dismantlement of certain aspects of the social state in order to stabilize costs and lighten the tax burden on enterprise). But these measures were taken ‘with a bad conscience and more under the cover of darkness than in the full daylight of … programmatic debates’.⁵⁸ Renouncing a credo that was considered outmoded, social democrats found themselves bereft of an intellectual framework to underpin their new pragmatism.

Since the second half of the 1980s, the social-democratic/socialist parties have begun to explain – and take responsibility for – the key ideas underlying their new governmental practice. In this respect, the formula of the French Prime Minister, Lionel Jospin – ‘yes to the market economy, no to the market society’ – perfectly encapsulates the new orientation, and major contradiction, of the new social democracy. The urge to harmonize two seemingly contradictory registers – regulation by the market and regulation of the market – is now the most taut and fragile strand in the new social-democratic synthesis.

This does not prevent these distinctly different registers – and instincts? – going in tandem, in a state of overt or latent intellectual conflict, yielding new political syntheses that lack vigour and consistency. Now, obviously, in the absence of consistency, only governmental practice, which is the litmus test for any great party, can end up producing it. Moreover, this is the only consistency that counts. And it inclines markedly to neoliberalism.

Social Democracy on the Defensive:
The Sketch of an Initial Social-Democratic Response

My argument here pertains not to economics, but to political science. It is not my objective (and I am not competent) to analyse the economic effectiveness, and draw up a balance sheet, of the policies pursued by socialist governments in the ‘new era’. Accordingly, there is no question of resuming in detail here analyses better formulated elsewhere – analyses, incidentally, whose conclusions remain uncertain and controversial. Even so, the interest of these policies is worth underlining. Their successes and failures are politically significant. I shall therefore briefly examine, on a purely illustrative basis, two pairs of governmental experiences. The first involves Sweden and Austria, two cases considered ‘exemplary’ for the 1980s by the great majority of specialists. The second consists of France and Great Britain, regarded as representative of contemporary socialism on account of their real or alleged rivalry.

(a)The Swedish Case

The ‘third way’ of the Swedish social democrats in the 1980s, which they presented as distinct both from the inflationary course of traditional Keynesianism – briefly pursued by the French and Greek socialists – and from the deflationary neoliberal route taken by the British Conservatives, initially proved effective.⁵⁹ According to Pontusson: ‘from 1983 to 1988, the Swedish economy grew at an annual rate of 2.7 per cent, the balance-of-trade deficit turned into a substantial surplus, and the rate of unemployment fell from 3.5 per cent to less than 2 per cent’.⁶⁰ The Swedish recovery was based on a major devaluation of the currency (16 per cent in 1982) and the wage moderation of the unions, and it was helped in the second half of the 1980s by a more clement international conjuncture. In addition, an active labour-market policy and expansion of the public sector sustained employment.⁶¹ Thus, confronted with the stagnation of private service-sector employment, expanding employment in the public sector – contrary to what occurred in Great Britain and the United States – was very important for the period 1970 to 1992.⁶² All this appeared once again to confirm the extraordinary capacity of Swedish social democrats, as in the 1930s and throughout the postwar period, to create jobs. Historically, this capacity was an essential component in the long hegemony of the SAP. The Swedish model of the 1980s, wrote Mario Telo in 1992, ‘demonstrated, at the height of the Thatcher decade, that modernization could be compatible with social policy and employment’.⁶³ The victory of the social democrats in 1988 was just reward for an economic success that seemed exceptional at the time.

However, the SAP’s policy proved incapable of containing inflationary pressures, which were increased by the crisis of centralized bargaining and the extension of wage drift. In a more inauspicious international economic context, having deregulated financial markets in 1985–86, the social-democratic government of the early 1990s resorted – what a historical irony! – to the arsenal of governments without any trade-union base of support: price and wages freeze, anti-strike measures, reductions in social security expenditure.⁶⁴ It became increasingly difficult to distinguish the policy of the social democrats, converted to austerity, from that of the bourgeois parties. A historical model was in the process of being progressively diluted. The SAP’s severe defeat in 1991 – after three consecutive electoral victories, it achieved its lowest electoral score since 1928 – dramatized the social democrats’ difficulty in establishing a societal model that combined social solidarity and economic efficiency. Worse still, for the first time the Swedish social democrats’ accession to power left the bitter taste of an ‘ideological void’. An identical void was experienced in Great Britain towards the end of the 1970s, following the failure of the Labour government’s ‘social contract’; in Denmark at the beginning of the 1970s; or – in a quite different register – in Greece and France after the end of the socialist intendancy (in 1989 and 1993 respectively).

The SAP’s return to government in 1994, amid grave economic difficulties (large budget deficit, weak currency, rising unemployment), led it to pursue a policy of severe austerity.⁶⁵ ‘Market solutions’ have become the central criterion of economic regulation in the SAP’s new economic policy, implemented gradually and accentuated since 1994. Thereafter, ‘Swedish macroeconomic policy [was] again mainstream’.⁶⁶ With the triumph of market logic, and a particularly strict budgetary and fiscal policy, the Keynesian inheritance has vanished. The anti-capitalist overtones inherent in the reformist offensive of the ‘wage-earner investment funds’ (1970s) now appear only too distant – as does ‘the most pronounced keynesian experiment in any of the OECD countries during the 1970s’.⁶⁷

Membership of the European Union has reinforced a restrictive budgetary policy (the deficit in the state budget fell from 12 per cent in 1994 to less than 2 per cent in 1997!); a strong currency policy (the krona was aligned with the ECU from May 1991); selective reduction in some social benefits; an increase in wage differentials; rising unemployment (the unemployment rate was 8.1 per cent in 1997 and 6.5 per cent in 1998, against less than 2 per cent in 1990). As for the indicator of social equality, the share of wages in GDP has declined appreciably since 1994.⁶⁸

The neoliberal reorientation of the SAP’s policy and the social deficit of its economic administration – one is inclined to say: the social-democratic deficit of its social-democratic administration – are not irrelevant to the electoral rout of the party in September 1998 (36.4 per cent of the vote against 45.2 per cent in 1994 and 37.7 per cent in 1991, the latter being regarded as the black year of social-democratic electoral history). The extraordinary electoral progress of the Left Party (12 per cent in 1998, against 6.2 per cent in 1994 and 4.5 per cent in 1991), which campaigned on a fairly social-democratic programme, only serves to underline the changed direction of social democracy and the relative disintegration of the Swedish model. Truly hegemonic until recently – ‘a virtual state ideology’, in Sassoon’s words⁶⁹ – Swedish social democracy has lost its originality both as a force with a distinct social and economic project and as an electorally winning force.

(b)The Austrian Case

From 1973 to 1980, Austrian policies achieved some remarkable results, noticeably better than most Western countries when it came to unemployment, inflation and growth. Combining a ‘hard currency’ policy to control imported inflation (the schilling had been aligned with the mark since the 1969 devaluation), very moderate wage rises (thanks to bi- and tripartite bargaining), an expansionary budgetary policy (to sustain demand and maintain employment), a fiscal regime favourable to investment and public investment programmes, ‘Austro-Keynesianism’ was able to safeguard competitiveness and full employment.⁷⁰ In the more restrictive international environment of the 1980s and 1990s, however, the specificity of the model was gradually diluted. Since 1983, Austro-Keynesianism has been progressively abandoned.⁷¹ Thus, ‘while maintaining the stabilizing elements of the model, i.e. the hard currency and moderate incomes policies, deficit spending as a discretionary strategy has been given up’.⁷² The priority was no longer employment, but reduction of the budget deficit. Active industrial policy (historically based on a very extensive nationalized sector, but facing painful problems of restructuration since the second half of the 1980s) was definitively replaced at the beginning of the 1990s by a policy of privatization. Adopted less out of conviction than under the constraint of the budgetary stabilizer, and pursued throughout the 1990s, this policy placed Austria in the first rank of European countries that have launched major privatization programmes. The macroeconomic performance of the Austrian economy remained rather good – at least as good as the average for the EU and OECD countries, and better than Sweden’s. And unemployment, rising sharply since 1981, remains fairly low according to European methods of calculating it (9.1 per cent in 1998, 4.4 per cent according to the Eurostat calculation). But the distinctive features of the Austrian social-democratic road have lost their relief and visibility of yesteryear. The tenacious pursuit of a policy of gentle liberalization throughout the 1990s, and up to their passage into opposition (after the election of October 1999), allow us to assert that the economic ‘miracle’ of the Austrian socialists (renamed social democrats since 1991), as well as their specificity, must be reckoned to be at an end.

(c)The Failure of the Crisis Compromise

As the Swedish and Austrian experiences indicate, social democrats, faced with crisis, appeared – after a good deal of experimentation and hesitation, and despite great national differences – to be able to implement what amounted (compared with the performance of neo-conservatism) to a rather effective policy, particularly during the second half of the 1970s and first half of the 1980s. Wage moderation, a direct result of neo-corporatist systems of national bargaining, and a prudently (but not always) expansionary budgetary policy, were the two common elements in what has been called – doubtless with a trace of exaggeration – the ‘social-democratic compromise of the crisis’.⁷³

The effectiveness of these policies, which varied according to the country, was confirmed not only in Scandinavia and Austria, but also in Germany. The double German success against inflation and unemployment, following the first oil shock, stemmed from a combination of anti-inflationary monetary discipline (ensured by the Bundesbank), a budgetary policy of prudent support for demand, and the wage moderation of the unions.⁷⁴ The policy of the German social democrats, which proved effective up to 1979–80, did not survive the second oil shock, however, and was predictably abandoned (particularly its budgetary component) by the new CDU-FDP government in 1982.

What must be emphasized here is that these policies – in Scandinavia and Austria, at least – were in large part linked to the distinctive features that make up the identity of the social-democratic parties. They were consistent with social democracy’s ‘policy style’ (‘the standard operating procedures for handling issues which arrive on the political agenda’).⁷⁵ Accordingly, although they were very prudent and moderate, they were policies of a social-democratic type. In fact, what lay at the base of the ‘crisis compromise’, as at the base of the social-democratic compromise of the 1950s and 1960s, was the classical pair of social-democratic party/trade union on the one hand, and so-called neo-corporatist co-ordination on the other, privileged strategic instrument for the pursuit of a long-term incomes policy. This was the real foundation of the social-democratic response to the new economic situation, derived from the tradition of social-democratic policy-making.

Many specialist studies have sought to show that the problems of the welfare state and the economic crisis were tackled better after 1973, when powerful social-democratic parties and strong, centralized union organizations were in a position to co-ordinate their action.⁷⁶ This was a time when ‘institutionalized’ capitalisms, the ‘organized market economies’ – and not specifically social-democratic capitalisms – were hailed as possessing a competitive advantage over the Anglo-Saxon liberal model.⁷⁷ According to this approach, the best results in terms of unemployment and, to a lesser degree, inflation or growth were generally obtained in countries where there was neo-corporatist mediation under social-democratic auspices.⁷⁸ According to Colin Crouch, even for the period 1986 to 1990, ‘both kinds of neo-corporatist economy – the employer-dominated and those with particularly strong labour – turn in the best performances’ on unemployment and inflation combined. It is worth adding that countries with ‘employer driven corporatism’ (Germany, Belgium, the Netherlands) did better on inflation; whereas properly social-democratic countries – those with ‘labour-dominated corporatism’ (Sweden, Norway, but also Finland) – did better on unemployment (with the exception of Denmark). Austria, another country with ‘labour-dominated corporatism’, was highly successful on both inflation and unemployment fronts.⁷⁹

So, according to a thesis widely held in the 1980s, the tripartite centralized model, combined with a flexible economic policy of ‘neo-Keynesian’ inspiration (or, better, semi-Keynesian and semi-liberal), constituted a political-institutional alternative that was economically superior to typical neoliberal policies.⁸⁰ Now, in the light of developments in the first half of the 1990s, this first attempt at a specifically social-democratic solution to the crisis – the word ‘model’ would be too strong – could not endure. From the beginning of the 1990s, the economic viability of the Scandinavian, Austrian, or German models was called into doubt. Faced with the globalization and neoliberalization of economic priorities, the social-democratic ‘solution’ proved fragile and ephemeral.⁸¹ And ironically, at the very moment when a body of academic work was highlighting the economic and social effectiveness of social-democratic institutions, ‘social democracy was beginning to vanish’.⁸²

Social Democracy on the Offensive?
Second Outline of a Social-Democratic Response

Drawing up an economic and social balance sheet of the ongoing social-democratic governmental experiences is difficult, since they have by no means yielded all their results. Right now, however, it is not a pointless exercise to try to evaluate the governmental practice of the ‘new’ social democrats. Two cases with different ideological and programmatic elaborations – British New Labour and the French gauche plurielle – will make it possible, by way of illustration, to get a better sense of the progress of the new social democracy in power.

(a)New Labour in Power

Change in neoliberal continuity is the hallmark of the Blairites’ governmental practice in economic affairs. In effect, the strategy implemented by the New Labour government hastened to respect the major lines of Conservative policy (prioritization of the fight against inflation, independence for the Bank of England in fixing interest rates, adoption of the Conservative budgetary credo, selective withdrawal of the state from the economic and social domain,⁸³ the complete absence of any industrial policy,⁸⁴ the preservation of deregulation and labour-market flexibility).

This macroeconomic policy prioritizes economic stability, largely abandons anti-cyclical fiscal and monetary policies and restraints the redistribute use of the tax system while making considerable efforts to increase labour supply. Labour’s macroeconomic management is complemented by a set of social measures of social-democratic inspiration intended to reduce feelings of insecurity, reactivate the traditional social dimension of Labourism, and maintain contact with the party’s popular electorate. Among other things, we might cite the establishment of a legal minimum wage; a one-off tax on the ‘windfall’ profits of the privatized utilities to finance an unemployment programme; the ‘welfare to work’ programme, which includes several ‘new deals’, the main one directed at youth unemployment; measures to counter ‘social exclusion’; increases in public expenditure on health and education; family tax credit; legal recognition of union organization in the workplace; a maximum 48-hour working week; and new laws on sickness, maternity leave and redundancy payments.⁸⁵

Thus, neoliberal macroeconomic policy is combined with a number of ‘left-wing’ social reforms and measures which aim to ‘limit the damage’ of the Conservative legacy. Labour’s option for addressing extreme poverty is to construct a highly targeted welfare state whose main role is to stimulate re-entry into the labour-market.⁸⁶ Yet the social planks of Blair’s policy, part of an aggressive strategy that aims to liberate Labourism once and for all from the image of a ‘tax and spend’ party, are modest indeed – and often contradictory. In their prudence they contrast sharply both with the very assertive and robust neoliberalism of the macroeconomic management, and with Labour’s constitutional reformism, which is simultaneously pragmatic and innovative.

More generally, traditional social-democratic economic policies, like the stimulation of demand and recourse to the state as economic actor, have been abandoned. Labour’s administration thus confirms Eric Shaw’s thesis, formulated in 1994, that ‘post-revisionism regarded the central Croslandite proposition, that democratic government had the ability to prevail over the power of business, as false’.⁸⁷

Even so, faced with the scourge of poverty, unemployment, social exclusion, and the deterioration of public services, any generalized withdrawal of the state is neither conceivable nor desirable, nor perhaps possible for the New Labourists. Such a withdrawal could, moreover, turn out to be electorally damaging. Hence a certain reaffirmation of the socially active role of the state – the state as promoter of inclusion and solidarity – in some sensitive areas (paralleling and complementing the policy of marketization). If Labour’s social policy is constructed on the basis of reforms introduced by the Conservatives (and sometimes, as in education or aspects of the ‘welfare to work’ programme, reinforces their liberal dimension),⁸⁸ it simultaneously seeks – and in this it is innovative – the path of a politics that ‘departs from the policies of Old Labour and New Tories’, while here or there distilling elements of politics closer to the logic of ‘Old Labour’.⁸⁹ Thus, Martin Hewitt’s claim about social security seems to be of wider validity: ‘in social security as elsewhere New Labour is seeking to tread a path marked by lines of continuity and discontinuity in a delicate balancing act.… It involves combining what under Old Labour and the New Right were seen as opposite attitudes and principles.’⁹⁰

In reality, before and after attaining power, ‘the trajectory of change for Labour has been overwhelmingly in one direction – that of convergence with the Conservatives on the basis of the dilution, weakening and selective abandonment of prior commitments’.⁹¹ Arguments to the effect that the ‘third way’ is located ‘beyond’ neoliberalism and the ‘old left’ do not accurately describe the governmental practice of New Labour. Equidistance is not maintained, and the break with neoliberal agenda and ‘old left’ agendas is, rather, unilateral. What is rejected on one side is ‘fundamentalist’ neoliberal rhetoric and the ultra-liberal practices induced by this rhetoric. But what is rejected on the other is the whole social-democratic tradition in economic policy,⁹² as well as part of the social-democratic tradition as regards social security and social rights.⁹³ Likewise rejected is the whole tradition of social-democratic ‘policy style’, which gave trade unions a ‘key position’ in the decision-making process. This leads inevitably to the cancellation of the third way as a radically different course, a way that simultaneously transcends liberalism and the ‘old’ social democracy. Moreover, the ‘timing’ of the conversion of Labourism to liberalism (a moment marked by the balance of social forces established by radical and aggressive Conservative reformism) strongly determined the practical content of the British ‘third way’. As Colin Hay and Mathew Watson have aptly emphasized: ‘The timing of Labour’s market conversion is in many ways as significant as that conversion itself. For to “accept the market” is not merely to accept a neutral mechanism of resource allocation. It is also to internalise and thereby normalise the form that the market took at the moment of that conversion.’⁹⁴

In reality, the ‘third way’ represents an enlightened and innovative administration (not a mere updating) of neoliberalism. Blair has adopted the Conservatives’ favourite themes, but combined them with reforms that go beyond Conservative logic.⁹⁵ The social measures set in train (often novel compared with the traditional social-democratic approach), like certain moves towards the requisite modernization of public services, are a constitutive element of this administration (and should not be underestimated). But this plan of action, apart from the fact that it is too modest when set against the explosion of economic and social insecurity, does not involve a rupture with, or resistance to, neoliberal logic.⁹⁶ The ‘big picture’ is neoliberal. The accompanying images are in large part social-democratic, even if they are not always social-democratic in the ‘traditional’ and habitual sense of the term.

(b)La Gauche plurielle

After a governmental experience too marked, especially in 1988–93, by liberal economic orthodoxy, the French left found itself in power once again in 1997. Victory was secured on a programme of moderate rupture with the economic and social orientation of preceding governments (right and left) and on a commitment to struggle against la fracture sociale.

If one of the first acts of the Blair government was to grant independence to the Bank of England, the calendar of the European Union meant that one of the first acts of the Jospin government was acceptance of the European stability pact, a less strict interpretation of which had been demanded by the left before the elections.⁹⁷ In accepting it without receiving anything real in return, France – and Europe – turned its back on the prospect of a Keynesian policy for stimulating economic activity. The subsequent resignation in March 1999 of Oskar Lafontaine, demonstrating the left’s powerlessness to construct a social-democratic Europe, interred the neo-Keynesian project conclusively.

The French government’s strategy has been based on a fourfold approach: a. budgetary consideration and price stability; b. actions to encourage stronger economic growth; c. targeting those unemployed who are the most alienated from the job market; d. multiplying the security-nets for those in extreme poverty. There are several signs of an economic policy that is more or less respectful of liberal orthodoxy:⁹⁸ respect for the letter – and no longer merely the ‘tenor’ – of the Maastricht Treaty; the adoption of budgetary orthodoxy; prioritization of the fight against inflation; the very slow progression, despite much more ambitious promises, in public expenditure (1 per cent over the years 2000–02, or 0.3 per cent per annum on average); a very moderate wages policy (though clearly more ‘permissive’ compared with previous austerity policies); multiple transfers of state interests in public enterprises.⁹⁹ Ultimately, the French left has not kept its engagement with a macroeconomic break. Despite some important ‘corrections’, the Jospin government has not redeemed its promise to break with liberalism.

Nevertheless, confronted with the ‘collective fear’ inspired by unemployment, poverty and social exclusion, a number of social measures have been taken ‘to advance solidarity’. Let us briefly itemize some of them: establishment of ‘universal sickness cover’ (operative from 1 January 2000) – an important measure in the battle against exclusion, since it will ensure health cover for the six million French people who do not have basic and complementary sickness insurance schemes;¹⁰⁰ transfer of social contributions to the ‘general social contribution’; increase in the guaranteed minimum wage of 4 per cent and in unemployment benefit of 2.2 per cent (1 July 1997); partial implementation of a youth employment project. Likewise to deal with social exclusion, the Fonds d’urgence sociale was set up during the winter of 1997–98 (close on the heels of the movement of the unemployed), followed – and, in practice, replaced – by the Commissions de l’action sociale d’urgence: structures that were more decentralized and better adapted to the enormous variety in the population affected by extreme poverty. Alongside these significant measures, other complementary steps have been taken, which are more limited in scope (if not symbolic, since their implementation falls well short of pre-election commitments): a slight increase in wealth tax; a tiny reduction in VAT to the benefit of the most modest households; light, temporary relief (two years) of taxation on businesses; moderately tightened taxation of savings.¹⁰¹

The launch of the 35-hour-week reform (an outline law was voted in June 1998, and a second law in January 2000), intended as the beacon of the new governmental team (if only for symbolic reasons), resulted in something rather different from what was promised before the elections. Thirty-five hours without loss of earnings, a promise that took its place in the framework of a moderately Keynesian policy (absorbing some unemployment without affecting internal demand), provoked the anger of employers, particularly at the outset. They characterized the reform as ‘archaic’, ‘doctrinaire’, and ‘dirigiste’, intent upon ‘overburdening’ enterprise – something that would be counterproductive, and have negative repercussions on employment. The enormous disparity of conditions (by enterprise and branch), the practical and legal problems encountered (annualization, overtime, work of executives, part-time jobs, etc.), government hesitation, the traditional weakness of French trade unions – these have progressively imparted a new content to the jigsaw puzzle of this reform, which was, in any event, very complicated to implement. Even so, its launch initiated major negotiations between social partners and the signing of thousands of enterprise accords. In reality, negotiations over the 35 hours affect all aspects of life in the firm and, regardless of the effects on employment, illustrate an administration of the labour market wherein arbitration is not the exclusive prerogative of the laws of the market, but also that of legislation and negotiation.

It is still not possible to sort out the positive and negative effects of the reduction in working hours, but there are already strong indications that employers have known how to turn certain aspects of the mechanism to their advantage, at least in part. At this stage it is not certain that it will trigger a powerful dynamic of job creation (hitherto, the repercussions on employment have been modest).¹⁰² It nevertheless seems to be agreed that trends towards job flexibility are being reinforced (flexibility endured has become negotiated flexibility, which is something); that wage moderation will persist; and that a large number of heads of firms will have the luxury of hiring ‘cheap’ (thanks to public aid).¹⁰³ Among the effects of the reform we should emphasize the trend towards a gradual reduction in job insecurity (some enterprise accords anticipate the transformation of insecure jobs into contracts of unspecified duration); and the possibility offered to a large number of wage-earners – but not all – to enjoy more free time for life outside work.¹⁰⁴

Thus, we observe that with the socialists, the state is continuing its partial withdrawal from the economic sphere, ceding an ever greater place to markets. However, the retreat from the ‘social’ sphere is a lot more difficult to effect and admit, especially in a country with a strong statist tradition and in a period of burgeoning social inequalities. The state thus appears to reassert, even reinforce, its presence in the ‘social’ sphere – its mechanisms of ultimate assistance – to counteract the effects of the explosion in poverty and job insecurity. Under a left-wing government, the state is simultaneously increasing the perimeter of the market and, faced with the emergency of social segregation, seeking to reinvest the ‘social’ in order to repair what can be repaired. It is therefore multiplying the ‘ultimate safety-nets’ of social security, which are directed not only at ‘major exclusion’ but at all those – in fact, the majority of beneficiaries – who are not in a position to secure decent living conditions for themselves.¹⁰⁵

Profiting from a favourable international situation and the more accommodating monetary policy conducted by the European Central Bank, the ‘plural left’ can today pride itself on its comparative success on the unemployment, growth, and social deficit fronts.¹⁰⁶ Its policy, which aims to secure the support of the trade unions, differs in several respects from that of the French right. In its ‘policy style’ it is even fairly consistent with the social-democratic modus operandi. In terms of its content, however, it is closer to a soft neoliberalism than the prudent neo-Keynesianism pledged by the socialists before the election and bruited thereafter. In social policy the government has incontestably taken a number of measures to improve employment, social security safety-nets (especially to maintain the poorest of the poor), to increase the social minima, to extend the rights of the ‘excluded’.¹⁰⁷ Moreover, it would be profoundly unjust to suggest that the two most important legislative initiatives – the youth employment programme (which has been a relative success),¹⁰⁸ and the reduction in working hours (distorted as it is compared with its original objectives) – are of neoliberal inspiration. They are fundamental reforms that directly affect daily life, and go beyond market regulation. If they achieve their objectives (which is far from guaranteed at the time of writing), their impact will transcend the borders of France. It is thus clear that the Jospin government is not submitting obediently and comprehensively to the general move towards liberalism. But it is also clear that it is not swimming against the current, that its policy does not represent a rupture with the neoliberal model of macroeconomic management. Accordingly, the French experience is marked by ambiguity. As usual, it is in France that the art of playing on two registers – deregulation and a certain re-regulation – is most flourishing today.

In adopting an ‘orthodox’ macroeconomic policy within the stabilizing framework of the European Union, the Jospin government has not really shown any inclination either to expand its budgetary room for manoeuvre, or to confront the power of the markets in order to sustain an economic and social policy more attuned to social-democratic aspirations. ‘You in Greece’, the French economist Jean-Paul Fitoussi said in an interview with the Greek journal Avgi – and you in England, we might add – ‘see a great difference between Jospin’s policy and Blair’s policy. But in reality the differences are not important. Lionel Jospin has accepted the arrangements of the European stability pact, which present an obstacle to any active budgetary policy.’¹⁰⁹ If change-in-neoliberal-continuity seems to be the hallmark of the Blairites’ governmental practice in economic affairs, change in neoliberal continuity also seems to mark the economic policy of the Jospin government. But when it comes to Jospin, there remains ‘that margin of resistance that makes him appear – despite the renunciations – still anchored in the lineage of reform’.¹¹⁰ Thus, the distancing from neoliberal logic (and the practice of previous left-wing governments in France) is more sharply and clearly asserted. And – as Henri Emmanuelli, former secretary of the PS, would say – ‘objectively, if we observe what is going on in Europe, the French government appears the most left-wing’.¹¹¹

The comparison with the Blairite démarche is illuminating here. On the level of discourse, the gauche plurielle is positioned distinctly and forcefully to the left of New Labour. On the level of governmental practice, it is equally to the left of Labour, but in much more discreet fashion. Thus, the more one passes from rhetoric to action, programme to performance, the more the distance narrows and convergences prevail. Accordingly, the import of this positioning to the ‘left’ should not be overestimated. But it should not be reckoned negligible either.¹¹² On both sides of the Channel, the new social democracy contains more neoliberalism than social democracy. Yet the proportions are not identical in Paris and London.¹¹³ Nor is the policy style. And the style, as Jules Michelet would say, ‘is simply the motion of the soul’.

(c)The Tradition Abandoned

The social-democratic institutional configuration that sustained the Scandinavian (especially Swedish), German, or Austrian capitalist ‘system’ – to cite only countries with a strong social democracy – is more or less fissured today. Furthermore, at least since the second half of the 1980s, a steady reorientation of social-democratic economic priorities has occurred, largely regardless of the ideological make-up of the national parties, and of economic or political circumstances. This entitles me to assert that the characteristic specificity of left-wing public policies has been greatly diluted.

Initially, particularly in the first half of the 1980s, social democracy strove to preserve the specificity of its economic and social policies, at least partially, while gravitating towards neoliberalism. Subsequently, in the 1990s, it manifestly adopted the neoliberal agenda. Especially in the years 1995 to 1998, the convergence criteria fixed by the Maastricht Treaty further constrained the policies adopted, above all in their budgetary component. European growth has collectively suffered from the simultaneity of restrictive policies, the multiplier effect influencing economic policies decisively.¹¹⁴

As our brief examination of the French and British cases has shown, the social-democratic art of playing on both registers – deregulation and a certain re-regulation; the market and the state – is far from having been abandoned. And there are good economic and social reasons for that. In this sense, the new politics of the social democrats – left- and right-wing, south and north – could be summarized thus: the ‘economic’ state withdraws in favour of the market and the ‘philanthropic’ state timidly re-emerges to reduce the social costs created by the market. Obviously, arbitrations differ from country to country, and the dose varies. But the centre of gravity in this tricky – and quasi-schizophrenic – game of accommodating contrary logics and influences weighs clearly and heavily in favour of liberalism. From this angle, the latest period may legitimately be considered that of ‘accommodation to the preferences of capital’.¹¹⁵

In the round, the adoption of orthodox policies and tendential decentralization of the structures of wage-bargaining have called into question four central pillars of the social-democratic approach: the policy of wage solidarity, which tended in the direction of the equality of wage-labour, and hence working-class unity;¹¹⁶ the policy of full employment, which has been definitively jettisoned; the policy of wealth redistribution in favour of labour (though social democracy’s impact on the distribution of income between wages and profits was traditionally modest); and the policy of power redistribution in favour of the wage-earning class and – above all – its trade-union representation (inside and outside the workplace).

I am therefore obliged to observe that the adoption by contemporary social democracy of policies of neoliberal inspiration, and the crisis of tripartite, centralized co-ordination – a modus operandi largely (but not exclusively) specific to social democracy – have impaired the politico-economic originality of the social-democratic alternative. It must equally be observed – drawing on Rand Smith’s classification – that social democracy has passed from a ‘market-modifying’ type of strategy to a ‘market-adapting’ strategy. According to Smith:

the market-modifying approach, like the market-adapting approach, accepts the basic capitalist framework, but seeks to modify that framework by enhancing organized labor’s power within it … The market-adapting approach accepts the market as the final arbiter … allows more time for adjustment and is certainly more labor friendly than the market-embracing approach, because the goal is to restructure without causing widespread economic distress or community upheaval.¹¹⁷

Now, the adoption of a ‘market-adapting’ strategy (New Labour being located almost midway between ‘market-adapting’ and ‘market-embracing’ strategies) is an economic-social option that is largely outside the social-democratic tradition, and represents a break with it.

Obviously, the power of the working-class movement, both political and trade-union, remains an influential factor in economic solutions and distributive conflict. Particularly in the countries of ‘labour-dominated corporatism’, the bi- and tripartite compromises, and the co-ordination of wage policies – at least at sectoral level – still have a far from negligible role to play.¹¹⁸ Even when it is fissured, this co-ordination remains an alternative structure of regulation that can always serve as a corrective to regulation by the market and unemployment.

But today’s social democrats, their room for manoeuvre greatly limited by a liberal international economic system and their own liberal options of the last two decades, seem resigned to choosing between different forms of inequality. And in spite of their anti-unemployment discourse (and their support for the unemployed by more or less generous systems of compensation), they seem rather inclined to sacrifice employment with a view to limiting the damage at the level of wage differentials and inequality.¹¹⁹ In this respect, Moene and Wallerstein’s analysis seems highly relevant:

There is probably no going back to the past, if the past is characterized as highly centralized wage setting that imposes a highly egalitarian wage distribution. The unions have grown too heterogeneous and competitive with each other to agree to a common goal of increased wage equality. Employers have hardened in their insistence on the relaxation of constraints on the payment of wage differentials. To the extent that central wage setting continues, it will entail less wage equality and fewer constraints on wage increases at the plant level. Nevertheless, wage setting may remain sufficiently centralized to provide a floor that protects the income, but not the employment, of workers at the bottom of the labor market.¹²⁰

The social and institutional achievements of societies with a powerful social democracy have not been erased from the map. Particularly in Scandinavia and Austria, across-the-board capitulation to neoliberal logic has been avoided.¹²¹ The welfare state, which has not really been dismantled anywhere in Europe, has been even less so in countries with a social-democratic structure. The spread of extreme poverty has been avoided. Income inequality has certainly become greater, but ‘the retreat from egalitarian outcomes has been fairly limited’.¹²² And if unemployment is the enemy of the pay slip, the automatic mechanisms of the invisible hand remain – still – under political control.

But while the situation as regards extreme poverty and the divide between ‘insiders’ and ‘outsiders’ is better in Scandinavia, elsewhere the exposure to insecurity and risk is considerably greater. Social-democratic policies in Europe – particularly in France, Germany and Great Britain – do not seem to be equipped really to check deepening social inequalities and segregation. As Gøsta Esping-Andersen has written: ‘if the opportunity structure for youth, women and the unskilled remains as blocked as it is today in much of Europe, we are more likely to see a rebirth of Disraeli’s Two Nations than a pluralist haven’.¹²³

Social Deficit and ‘Identity’ Deficit

Any economic option is assessed according to an economic calculus (effects on the dynamism of the economy), but also according to a calculation that is simultaneously political (electoral costs and benefits, costs and benefits in terms of ideological-political positioning) and social (whom does a policy benefit?, or costs and benefits according to social class). By the latter calculation, social democracy has not yet defined a new economic and social equation capable of producing electoral and identity effects equivalent to those of the Keynesian equation.

Unquestionably, there are no economic policies ready and just waiting for the left to adopt them. But for the first time since the Second World War social democrats do not possess a politically plausible social and economic strategy – that is, one both inspired by their own tradition and clearly distinct from that of their opponents. In this respect, regardless of its raison d’être and specifically economic value, the social-democratic economic response was not effective politically: it largely stopped being a vector of left-wing identity for the social-democratic parties and a factor of political unification for the subaltern classes, the natural social base of these parties. Socialist and social-democratic policies are no longer seen as making sense, particularly for popular strata. In this context the exercise of power has become a key factor in the destabilization and transformation of social-democratic identity.

In some sense there is a cause-and-effect relation between the diminished social effectiveness of social-democratic policies and their yield in terms of ‘identity’. If a different political force was involved, this diminution would probably be less embarrassing. But it seems that the identification of social democracy with the welfare state and workers’ interests holds great sway over European populations, disproportionate to the actual historical record (for it should not be forgotten that in several countries, conservative and Christian democratic parties contributed significantly to the advent of the welfare state). Now, once social democracy distances itself from Keynesianism and the welfare state, once it proves less capable of protecting the weakest – and hence its own social profile – it is because social democracy is no longer truly social democracy, or rather, is no longer held to be so. And this despite the fact that social-democratic neoliberalism is an inventive neoliberalism ‘with a human face’; and the current enterprise of a certain re-regulation of the social domain offers a modest corrective to the laws of the market. But the overall impression does not change so long as restrictive budgetary policy remains dominant at the national and European levels; fiscal policy is scarcely used, or not used at all; and the instrument of national and European monetary policy is voluntarily downgraded in favour of an orthodoxy obsessed with inflationary fears.

A few words in conclusion. With the crisis and transformation of advanced capitalism, Keynesian regulation and neo-corporatist, tripartite consultation, two ‘efficient causes’ that helped to make social-democratic parties dominant political forces have been significantly challenged. However, social democracy has proved able to adapt to the new economic and social situation. Its specifically economic responses lack neither coherence nor technocratic effectiveness. But relative to their own social aspirations, they are extremely disappointing (particularly on employment and the reduction of inequalities). They are therefore politically inadequate. The dismantling of the model of economic and social policy bequeathed by social democrats from the first three decades of the postwar period means that the social-democratic social message is hopelessly indistinct. Social democracy has lost its influence as a force stemming from the working-class movement, and its attempts at a new synthesis create the impression that there is no new economico-social project to be substituted for the ‘old’ one. In the face of contemporary neoliberal reality, the ‘loss’ of the postwar project does not seem to be something that can be compensated for in the medium term. Combined with the social mutation of the new social democracy, and its opening to the middle classes and the world of big capital, this loss fuels its electoral instability and radically challenges the sociohistorical meaning of its project. The tragedy for social democrats, even for victorious social democrats at the dawn of this new century, even for those of them who do not experience it as a ‘tragedy’ – is that their urge (if only rhetorical) to act in accordance with a ‘sense of justice’ remains economically unarticulated. This renders their identity inarticulate. That is the great lesson of the last two decades.

Notes

1.Le Monde, 16/17 September 1990.

2.Fritz Scharpf, Crisis and Choice in European Social Democracy, trans. Ruth Crowley and Fred Thompson, Cornell University Press, Ithaca, NY and London 1991, p. 270.

3.Because of its protectionist and undemocratic connotations, the term ‘corporatism’ hardly accords with the spirit of the ‘centralized bargaining system’ characteristic of various countries with a powerful social democracy. See Karl Ove Moene and Michael Wallerstein, ‘Social Democratic Labor Market Institutions: A Retrospective Analysis’, in Herbert Kitschelt et al., eds, Continuity and Change in Contemporary Capitalism, Cambridge University Press, Cambridge 1999, pp. 233–4.

4.Bruce Western, ‘A Comparative Study of Working-Class Disorganization: Union Decline in Eighteen Advanced Capitalist Countries’, American Sociological Review, no. 60, 1995, p. 184.

5.Jonas Pontusson, ‘Le modèle suédois en mutation: vers le néoliberalisme ou le modèle allemand?’, in Colin Crouch and Wolfgang Streeck, eds, Les Capitalismes en Europe, La Découverte, Paris 1996, p. 81.

6.Wallace Clement, ‘Exploring the Limits of Social Democracy: Regime Change in Sweden’, Studies in Political Economy, no. 44, 1994, p. 101.

7.Ibid.

8.See Miriam Golden, Michael Wallerstein and Peter Lange, ‘Postwar Trade-Union Organization and Industrial Relations in Twelve Countries’, in Herbert Kitschelt et al., eds, Continuity and Change in Contemporary Capitalism, pp. 205–13.

9.Torben Iversen, ‘Power, Flexibility and the Breakdown of Centralized Wage Bargaining’, Comparative Politics, vol. 28, no. 4, 1996, p. 403.

10.Colin Crouch, ‘Exit or Voice: Two Paradigms for European Industrial Relations after the Keynesian Welfare State’, European Journal of Industrial Relations, vol. 1, no. 1, 1995, p. 73.

11.Torben Iversen, ‘The Choices for Scandinavian Social Democracy in Comparative Perspective’, Oxford Review of Economic Policy, vol. 14, no. 1, 1998, p. 66.

12.Le Monde Diplomatique, June 1998, p. 17.

13.Michael Wallerstein, Miriam Golden and Peter Lange, ‘Unions, Employers’ Associations and Wage-Setting Institutions in Northern and Central Europe, 1950–1992’, Industrial and Labor Relations Review, vol. 50, no. 3, 1997, p. 395.

14.Crouch, ‘Exit or Voice’, pp. 73–4.

15.According to Wallerstein et al., in practice ‘the Dutch confederations have failed to conclude a frame agreement in most years since 1970’; and, following these failures, governmental regulation became more active, particularly towards the second half of the 1970s and at the beginning of the 1980s (‘Unions, Employers’ Associations and Wage-Setting Institutions’, p. 394).

16.Anton Hemerijck and Jelle Visser, ‘Quel “modèle hollandais”?’, La Revue Socialiste, no. 1, 1999, passim; Torben Iversen, Contested Economic Institutions: The Politics of Macroeconomics and Wage Bargaining in Advanced Democracies, Cambridge University Press, Cambridge 1999. It should, however, be noted that the Dutch unions were opposed to the reduction of social benefits and very hesitant about part-time employment and flexibility. The reform of the social security system (particularly disability benefits), carried out against the unions’ opposition, involved a confrontation between them and social democracy. It provoked a wave of mobilizations, the unions organizing (in The Hague) the largest demonstration since the Second World War in 1991 (Hemerijck and Visser, ‘Quel “modèle hollandais”?’, p. 74).

17.Christophe de Voogd, ‘Pays-Bas: victoire et doutes de la coalition violette’, in Alfred Grosser, ed., Les Pays d’Europe occidentale, Documentation Française, Paris 1999, p. 116.

18.Iversen, ‘The Choices for Scandinavian Social Democracy’, pp. 66, 70. See also Bruce Western, Between Class and Market: Postwar Unionization in the Capitalist Democracies, Princeton University Press, Princeton, NJ 1997, pp. 161–3.

19.See Frans Becker and René Cuperus, ‘Dutch Social Democracy between Blair and Jospin’, in Cuperus and Johannes Kandel, eds, European Social Democracy: Transformation in Progress, Friedrich Ebert Stiftung, Amsterdam 1998, p. 252.

20.Western, Between Class and Market, p. 47.

21.Ibid., p. 48.

22.John Kelly, Trade Unions and Socialist Politics, Verso, London and New York 1988, p. 101.

23.Colin Crouch, ‘The Fate of Articulated Industrial Relations Systems: A Stock-Taking after the “Neo-liberal” Decade’, in Marino Regini, ed., The Future of Labour Movements, Sage, London 1992, p. 181.

24.Martin Hewitt, ‘New Labour and Social Security’, in Martin Powell, ed., New Labour, New Welfare State?, The Policy Press, Bristol, 1999, p. 167.

25.Donald Sassoon, ‘Le nouveau Labour, exemple or contre-exemple?’, Esprit, no. 251, 1999, p. 65; Peter Dorey, ‘The Blairite Betrayal: New Labour and the Trade Unions’, in Gerard Taylor, ed., The Impact of New Labour, Macmillan, London 1999, pp. 202–3. ‘It is an open secret that the TUC leaders and the various heads of unions feel betrayed and outcast by Downing Street,’ Lindsey German has written (‘The Blair Project Cracks’, International Socialism, no. 82, 1999, p. 29). The word ‘betrayal’ is certainly too strong, given that the promises were very modest. Moreover, the unions are not excluded from all consultation, although such consultation as has occurred involved subjects of little importance (Dorey, ‘The Blairite Betrayal’, pp. 202–3). It nevertheless remains the case that ‘the fact that New Labour’s pre-election pledges to the trade unions were so modest makes their subsequent downgrading and dilution even more offensive’ (ibid., p. 207).

26.Pontusson, ‘Le modèle suédois en mutation’.

27.Horst Kern and Charles Sabel, ‘Trade Unions and Decentralized Production: A Sketch of Strategic Problems in the German Labour Movement’, in Marino Regini, ed., The Future of Labour Movements, Sage, London 1992, p. 218.

28.Western, Between Class and Market, p. 159; also Crouch, ‘The Fate of Articulated Industrial Relations Systems’, p. 182.

29.Steve French, ‘A “Third Way” through Social Pacts? Trade Union Weakness and the Limits of German Corporatism’, in Lothar Funk, ed., The Economics and Politics of the Third Way, LIT, Hamburg 1999, p. 114.

30.Western, Between Class and Market, p. 160.

31.See Richard Hyman, ‘National Industrial Relations Systems and Transnational Challenges: An Essay in Review’, European Journal of Industrial Relations, vol. 5, no. 1, 1999, p. 96.

32.Nils Elvander, quoted in Western, ‘A Comparative Study of Working-Class Disorganization’, p. 185.

33.Iversen, ‘Power, Flexibility and the Breakdown of Centralized Wage Bargaining’, p. 428.

34.Iversen, ‘The Choices for Scandinavian Social Democracy’, p. 71.

35.Wallerstein et al., ‘Unions, Employers’ Associations and Wage-Setting Institutions’, pp. 390–91.

36.Iversen, ‘Power, Flexibility and the Breakdown of Centralized Wage Bargaining’, p. 424.

37.Ferdinand Karlhofer, ‘The Present and Future State of Social Partnership’, in Gunter Bischof and Anton Pelinka, eds, Austro-Corporatism, Contemporary Austrian Studies, vol. 4, 1996, pp. 121–2.

38.Alois Guger, ‘Economic Policy and Social Democracy: The Austrian Experience’, Oxford Review of Economic Policy, vol. 14, no. 1, 1998, p. 53.

39.Iversen, ‘Power, Flexibility and the Breakdown of Centralized Wage Bargaining’, p. 426.

40.Golden et al., ‘Postwar Trade-Union Organization and Industrial Relations in Twelve Countries’, pp. 208–9.

41.Guger, ‘Economic Policy and Social Democracy’, p. 55.

42.In countries without a neo-corporatist tradition (France, Greece, Spain), efforts in the direction of greater consultation were made by socialist governments – with very mixed and inconclusive results. The absence of a party structure of a social-democratic type, the socialists’ difficulty in managing a fratricidal union pluralism, and an adverse economic situation objectively encouraged the politics of outbidding rivals and a return to governmental regulation.

43.Golden et al., ‘Postwar Trade-Union Organization and Industrial Relations’.

44.Iversen, ‘The Choices for Scandinavian Social Democracy’, p. 63.

45.Christer Thørnqvist, ‘The Decentralization of Industrial Relations: The Swedish Case in Comparative Perspective’, European Journal of Industrial Relations, vol. 5, no. 1, 1999, p. 83.

46.Marino Regini, ‘Introduction: The Past and Future of Social Studies of Labour Movements’, in Regini, ed., The Future of Labour Movements, p. 7.

47.Karl Ove Moene and Michael Wallerstein, ‘How Social Democracy Worked: Labor-Market Institutions’, Politics and Society, vol. 23, no. 2, p. 207.

48.Regini, ‘Introduction’, p. 7.

49.The tradition of relatively strong works councils (Austria, Germany), or the existence of an important privileged sector of ‘cost-insensitive employers and militant “maverick” unions (the booming petrochemical sector in Norway)’, seems to be a significant counter-incentive for employers – a sort of safety valve – inclining them against abandonment of central bargaining (Western, Between Class and Market, p. 160; Iversen, ‘Power, Flexibility and the Breakdown of Centralized Wage Bargaining’, p. 411).

50.Iversen, Contested Economic Institutions, pp. 163–5.

51.Thornqvist, ‘The Decentralization of Industrial Relations’, p. 72.

52.Golden et al., ‘Postwar Trade-Union Organization and Industrial Relations’. The proportion of waged workers covered by collective agreements remains very high: more than 70% in the European countries, with the invariable exception of Great Britain. ‘This is not to say that unions today bargain as effectively on behalf of their workers as they did earlier, but it does mean that their institutional role in the bargaining process remains largely intact and that they often continue to be able to take a large portion of wages out of competition’ (ibid., p. 205).

53.Alan Cawson, quoted in Karlhofer, ‘The Present and Future State of Social Partnership’, pp. 119, 120.

54.Iversen, Contested Economic Institutions, p. 159.

55.Quoted in Hyman, ‘National Industrial Relations Systems and Transnational Challenges’, p. 95. The agreements concluded in Italy, Holland and Ireland represent examples of this trend (ibid., pp. 94–5). The agreement on a 35-hour week reached in France also tends in the direction of negotiated flexibility.

56.Wallerstein et al., ‘Unions, Employers’ Associations and Wage-Setting Institutions’, p. 392.

57.Iversen, Contested Economic Institutions, p. 164.

58.Scharpf, Crisis and Choice in Social Democracy, p. 323. See also p. 30.

59.Pontusson, ‘Sweden: After the Golden Age’, in Perry Anderson and Patrick Camiller, eds, Mapping the West European Left, Verso, London and New York 1994, p. 34.

60.Ibid., p. 36.

61.In Sweden, active employment policy was traditionally exceptional in both its sophistication and its ‘selective’ and ‘active’ character. At the end of the 1980s, the ‘proportion of labour market funds spent on active measures’ to support employment was remarkably higher than the average for the OECD countries, making Sweden a truly ‘deviant case’ (Bo Rothstein, The Social Democratic State: The Swedish Model and the Bureaucratic Problem of Social Reforms, University of Pittsburgh Press, Pittsburgh, PA and London 1996, p. 60; Thomas Janoski, ‘Direct State Intervention in the Labor Market: The Explanation of Active Labor Market Policy from 1950 to 1988 in Social Democratic, Conservative and Liberal Regimes’, in Janoski and Alexander Hicks, eds, The Comparative Political Economy of the Welfare State, Cambridge University Press, Cambridge 1994, p. 55).

62.This was also true of the other Scandinavian countries.

63.Mario Telo, ‘Les représentations de l’adversaire et compromis social dans la politique de la social-démocratie allemande’, AFSP, Fourth Congress, Paris 1992.

64.Elie Cohen, ‘La gauche et l’économie dans les expériences de pouvoir’, in Marc Lazar, ed., La Gauche en Europe depuis 1945, Presses Universitaires de France, Paris 1996, pp. 645–6.

65.Juhana Vartiainen, ‘Understanding Swedish Social Democracy: Victims of Success?’, Oxford Review of Economic Policy, vol. 14, no. 1, 1998, p. 37.

66.Bernd-Joachim Schuller, ‘The Swedish Third Way: Macroeconomic Policy and Performance’, in Funk, ed., The Economics and Politics of the Third Way, p. 54.

67.Jonung, quoted in ibid., p. 41.

68.Ibid., pp. 46–8. In 2000, the Swedish economy was among the EU leaders in the fight against inflation, and seemed to have regained – if only partially – its position of ‘low-unemployment country’.

69.Donald Sassoon, One Hundred Years of Socialism, I.B. Tauris, London 1996, p. 479.

70.Alain Bergounioux and Bernard Manin, Le Régime social-démocrate, Presses Universitaires de France, Paris 1989, pp. 157–9; Hans Seidel, ‘Social Partnership and Austro-Keynesianism’, in Bischof and Pelinka, eds, Austro-Corporatism, pp. 108–13.

71.Ibid., p. 114.

72.Guger, ‘Economic Policy and Social Democracy’, p. 56.

73.Bergounioux and Manin, Le Régime social-démocrate.

74.Ibid., p. 150.

75.Jeremy John Richardson, quoted in David Arter, ‘Sweden: A Mild Case of “Electoral Instability Syndrome”?’, in David Broughton and Mark Donovan, eds, Changing Party Systems in Western Europe, Pinter, London and New York 1999, p. 169.

76.In countries with a powerful trade-union movement (like Sweden, Austria, Germany), the development of real wages in the period 1960–90 matched the improvement in productivity, even after 1975 (though to a lesser degree). In Italy, another country with a strong union movement, ‘changes in inflation are most salient in predicting real wages’ (Thomas Volgy, John Schwarz and Lawrence Imwalle, ‘In Search of Economic Well-Being: Worker Power and the Effects of Productivity, Inflation, Unemployment and Global Trade on Wages in Ten Wealthy Countries’, American Journal of Political Science, vol. 40, no. 4, 1996, p. 1245). By contrast, in countries with a moderately strong or moderately weak working-class movement (France, the Netherlands, Canada, Japan), it is unemployment that most influences the wage equation. The same is true of the United States, a country with a very weak union movement. More specifically, in the 1990s in the USA – recently bruited as a model of economic success – ‘despite increased productivity, increased penetration of global markets, rising profits and low unemployment the real pay of the average production worker continued to decline’ (ibid., p. 1248).

77.Colin Crouch and Wolfgang Streeck, ‘L’avenir du capitalisme diversifié’, in Crouch and Streeck, eds, Les Capitalismes en Europe, p. 13.

78.For purposes of information, the average unemployment rate for the period 1982–88 was 2.7% in Sweden, 2.7 in Norway, 3.5 in Austria, and 6.7 in Germany (3.5 in 1975–81 during the SPD-FDP government). In the same period the rate was 11% in the United Kingdom, 9.6 in France, 9.8 in Italy, and 10.4 for all the countries of the European Community (Moene and Wallerstein, ‘How Social Democracy Worked’).

79.Crouch, ‘The Fate of Articulated Industrial Relations Systems’, pp. 183–5.

80.According to Iversen, in the period 1973–93 two institutional configurations produced the best results as regards unemployment: ‘a centralized mode of wage regulation where the government enjoys macro-economic flexibility and a decentralized (or semi-centralized) bargaining system in which the government is credibly committed to a non-accommodating monetary policy rule’. The first system (particularly the Scandinavian countries) is associated with a more egalitarian wages policy; the second (notably Germany, the Netherlands, Austria in part) is more inegalitarian (‘Wage Bargaining, Hard Money and Economic Performance: Theory and Evidence for Organized Market Economies’, British Journal of Political Science, no. 28, 1998). That said, the relative decentralization of bargaining systems and the adoption of orthodox monetary policies explain the recent intensification of wage inequalities in the Scandinavian countries.

81.The same picture is in part confirmed in the countries of southern Europe. According to Andrew Glyn, socialist governments in France (1981–93), Spain (1981–95), and Greece (1981–89), ‘all notoriously high-inflation countries, presided over noticeably larger increases in unemployment than the average for the OECD over the same period. Usually inflation was reduced by no more than the average fall, and this reflected the generally higher inflation to begin with: but the disinflation exacted a heavy toll in terms of lost jobs’ (‘The Assessment: Economic Policy and Social Democracy’, Oxford Review of Economic Policy, vol. 14, no. 1, 1998, p. 12). Having undertaken policies of isolated reflation, which were abandoned in 1983 and 1984 respectively, and having proceeded to successive devaluations of their currencies, the socialist governments of France and Greece likewise finally opted for a strong currency strategy. However, in Spain and Greece, countries with a weak welfare state, a sharp improvement in social security and social rights was observed throughout the 1980s. From the second half of the 1980s the profits of capital, initially contested and then considered the principal condition for a recovery in investment, rose everywhere, and most especially in France (ibid., p. 13). The explosion of capitalist profits in Greece was considerably more tardy (second half of the 1990s), and occurred under a socialist government. It is indicative that PASOK, often accused of ‘populism’ and ‘nationalism’, was considered ‘the party of the stock exchange’ towards the end of the 1990s.

82.Karl Ove Moene and Michael Wallerstein, ‘Social Democratic Labor Market Institutions: A Retrospective Analysis’, in Kitschelt et al., eds, Continuity and Change in Contemporary Capitalism, p. 232.

83.This takes the form less of traditional privatizations (e.g. the decision to privatize British air traffic control) than of the transfer of public-sector responsibilities to the private sector (public-private partnership in the domain of health and education, accelerated recourse to the private sector in the domain of pensions, encouragement to buy services previously supplied by the public sector). The progressive introduction of market criteria into the operation of the public sector is another aspect of the state’s withdrawal.

84.The absence of an industrial policy is all the more significant in that British finance capital is ‘risk averse, short term in its calculations and notorious for its unwillingness to support investment and innovation’ (Colin Hay, The Political Economy of New Labour: Labouring under False Pretences?, Manchester University Press, Manchester 1999, p. 185).

85.Keith Dixon, Un digne héritier: Blair et le thatchérisme, Raisons d’Agir, Paris 2000, pp. 65–71; Jacques Leruez, ‘Royaume-Uni: un “état de grâce” persistant’, in Alfred Grosser, ed., Les Pays d’Europe occidentale, Documentation Française, Paris 1999; Sassoon, ‘Le nouveau Labour’; Le Monde, 26 May 1999.

86.John Grahl, ‘Le gouvernement Blair et le modèle social britannique’, L’économie politique, no. 3, 1999; see also: Merkel, ‘The Third Ways of Social Democracy’, pp. 38–42; Andrew Glyn and Stewart Wood, ‘New Labour’s Economic Policy’, in Andrew Glyn, Social Democracy in Neoliberal Times, Oxford University Press, Oxford and New York, 2001.

87.Quoted in Hay, The Political Economy of New Labour, p. 16.

88.‘Mr Blair represents his welfare reforms as a continuation of the spirit of Beveridge, but this is simply not the case’, Stuart Hall has justifiably written (‘The Great Moving Nowhere Show’, Marxism Today, November/December 1998, p. 12). In several domains, like housing, New Labour has accepted part of the philosophy and prescriptions of the Conservatives (Peter Kemp, ‘Housing Policy under New Labour’, in Powell, ed., New Labour, New Welfare State?, p. 146).

89.Powell, ed., New Labour, New Welfare State?, passim.

90.Hewitt, ‘New Labour and Social Security’, in Powell, ed., New Labour, New Welfare State?, pp. 150–51.

91.Hay, The Political Economy of New Labour, p. 140.

92.Dixon, Un digne héritier, p. 112.

93.‘To many commentators,’ Eric Shaw has written, ‘the modernization of Labour marks its long-delayed conversion to European-style social democracy. In fact the real ideological significance of “New Labour” is the abandonment of Keynesian social democracy in favour of pre-Keynesian orthodoxy’ (The Labour Party since 1945: Old Labour, New Labour, Blackwell, Oxford 1996, p. 201).

94.Colin Hay and Mathew Watson, ‘Neither Here Nor There?’ p. 177.

95.John Crowley, ‘Tony Blair: un modèle politique pour la gauche’, L’économie politique, no. 3, 1999, p. 46.

96.See also Dixon, Un digne héritier, pp. 83–5.

97.Jospin opened his electoral campaign with a shock announcement: if the left came to power, there would be no new turn of the budgetary screw, even if meeting the convergence criteria imposed by entry into the euro required it. This position, coupled with other ‘conditions’ (among them we should mention the requirement of setting up an economic government to counterbalance the European Central Bank and a European pact for growth), allowed Jospin to position himself on the left, and reassert the ‘French exception’ in European affairs (Libération, 22 May 1997).

98.Gérard Desportes and Laurent Mauduit, La Gauche imaginaire et le nouveau capitalisme, Grasset, Paris 1999, passim.

99.According to the economist Elie Cohen, Jospin ‘privatizes more than the previous right-wing governments’, despite the pre-election rejection of any new privatization (Institut d’Études Politiques, Paris, oral communication, October 1999).

100.Desportes and Mauduit, La Gauche imaginaire, p. 82.

101.Ibid., passim.

102.Institutes of economic analysis (at least, the most optimistic of them) forecast the creation of 450,000 posts when all firms are applying the law. According to the government, in October 2000 more than 40,000 agreements had been signed since the first law in June 1998, with – at the end of it all – 232,000 promises of jobs created (88%) or preserved (12%). These figures, and a host of others, fuel the controversy, since it is very difficult to know the precise number of jobs created solely by virtue of the reduction in working hours.

103.Martine Bulard, Le Monde diplomatique, October 1999.

104.Le Monde, 21 May 1999.

105.Le Monde, 1 December 1998. A clear difference of philosophy distinguishes French socialists from British Labourists in their conception of social solidarity. Income support, proposed in December 1988 by the socialist government of Michel Rocard, is the social measure which, more than any other, attracted the attention of the major media. If from the outset the right wanted an ‘activity in return’ for the receipt of this benefit, so as not to trap the beneficiaries in welfare, the left conceived – and conceives – the Revenu minimum d’insertion as an unconditional right guaranteed by society and the state (Le Monde, 1 December 1998). By contrast, in the United Kingdom, New Labour’s reduction of single-parent benefits, and the reappearance via the ‘welfare to work’ programme of the classical conservative theme of the ‘dependency culture’ of the poor, are two examples of a social policy which is influenced by liberal philosophy.

106.Growth reached 2.7% in 1999 (but 3.6% in the last quarter of the year), after 3.4% in 1998 and 2% in 1997. Inflation reached 1.6% per annum in January 2000, placing France among the best performers of the European Union, but still behind Austria, the United Kingdom, Sweden, and the Netherlands. On the employment front, with a rate of unemployment standing at 10.5% at the beginning of 2000 – when the Netherlands posts 2.7% and the UK 4% – France comes twelfth out of fifteen in the EU (Le Monde, 17 March 2000). It remains the case that this rate is 2.1% less than the peak of summer 1997 (Françoise Milewski, ‘La croissance’, in OFCE, L’économie française 2000, La Découverte, Paris 2000, p. 51).

107.Desportes and Mauduit, La Gauche imaginaire, p. 191.

108.By the end of August 1999 208,550 posts had been provided and the rate of youth unemployment has fallen by 3% since 1997 (Oliver Brossard, ‘L’emploi et le chômage’, in OFCE, L’économie française 2000, La Découverte, Paris 2000, p. 60). By March 2000, according to the French government, more than 276,000 young people have been hired under the ‘New Services – New Jobs’ program.

109.Avgi, 21 March 1999.

110.Desportes and Mauduit, La Gauche imaginaire, p. 233.

111.Le Monde, 3 March 2000.

112.The conjunction of a number of specifically British factors has favoured the profoundly revisionist policy of the Blair team. Let us mention some of them once again: (a) Labour’s deficit in managerial credibility and its long confinement to opposition (‘the obsession with failure’); (b) the absence of an important competitor on Labour’s left; (c) the historic defeat of the British trade unions, without parallel in continental Europe; (d) the traditional conservatism, considerably stronger than elsewhere, of the middle classes in Great Britain; (e) the great English liberal tradition that made the United Kingdom the weak link among the countries with a strong social-democratic presence. The combination of all these factors obtained only in Great Britain, making it ideal terrain for any radical ‘revisionist’ strategy.

113.By contrast, when it comes to ‘cultural liberalism’ the French left seems faithful to a long social-democratic tradition. The Pacte civile de solidarité (known as PACS), a measure that lifts the taboo on homosexuality and aims to strengthen the rights of couples, homosexual and heterosexual alike, who do not wish to, or cannot, marry, has created a clear divide between left and right. Similarly, legislation on the entry and stay of foreigners (1998) – legislation that was, however, criticized by some on the left – the law on parity of men and women (1999) and on nationality (1997), are indicative of a policy on societal questions that is a good deal more ‘open’ than the right’s. In its tonality and content, this policy differs from the ‘law-and-order and moralizing discourse’ of New Labour (Dixon, Un digne héritier, p. 90). The latter has certainly introduced some liberal measures (e.g. relaxation of the draconian rules on the entry into the United Kingdom of the fiancés or spouses of foreign residents, or the abolition of the legal discrimination between heterosexual and homosexual acts as regards the age of consent). But a ‘law-and-order’ approach marks its policy.

114.Milewski, ‘La croissance’, pp. 12–13.

115.Hay, The Political Economy of New Labour, p. 158.

116.According to Moene and Wallerstein: ‘in the decade following the breakup of centralized bargaining in Sweden in 1983, wage inequality, as measured by the ratio of wages at the ninth and first decile of the wage distribution, increased by 9 per cent’. In these years the increase in wage differentials in Sweden was less strong than in Great Britain (14%) and the United States (23%), and markedly stronger than in Norway, Denmark, the Netherlands, Austria, and Germany, countries where social consultation did not break down (‘Social Democratic Labor Market Institutions’, p. 249).

117.Raud Smith, The Left’s Dirty Job, Pittsburgh University Press, Pittsburgh 1998, pp. 11, 211–12.

118.Pontusson, ‘Le modèle suédois en mutation’.

119.Iversen, ‘The Choices for Scandinavian Social Democracy in Comparative Perspective’, pp. 72–3. Some countries, like the Netherlands and Great Britain, have seen their unemployment rates fall spectacularly. These are countries that have undertaken profound reforms of their labour markets over the last ten years at least, either in a more or less negotiated fashion (the Netherlands) or violently, and while strongly exacerbating inequalities (Great Britain).

120.Moene and Wallerstein, ‘How Social Democracy Worked’, p. 207.

121.Glyn, ‘The Assessment’, pp. 16–17. See also Iversen, ‘The Choices for Scandinavian Social Democracy’.

122.Glyn, ‘The Assessment’, p. 13.

123.Gøsta Esping-Andersen, ‘Politics without Class: Postindustrial Cleavages in Europe and America’, in Kitschelt et al., eds, Continuity and Change in Contemporary Capitalism, p. 316.